Bank fixed deposit rates explained

Bank fixed deposits (FDs) continue to be popular investment products not just among senior citizens, who are looking for guaranteed income, but also among investors who can’t stomach risk or simply don’t have the wherewithal to invest in other asset classes like mutual funds. In a sense, FDs are simple comfort food on a menu comprising investment products with complicate recipes.

But over-exposure to FDs is not good, and you need to assess your asset allocation and goals to decide how much money you should park in them. For instance, saving for your child’s higher education that’s 15 years away through FDs may not be a great idea as the post-tax interest rate of an FD may not give you a real return (return that’s above the rate of inflation), but if you plan to take a holiday in two years and want to park your savings in a safe investment avenue, an FD can help.

Remember that interest earned from FDs gets added to your total income and is accordingly taxed at your slab rate. Usually, banks you already have a relationship with allow you to open an FD through your netbanking account.

But how do you pick the right FD? FD rates vary across banks, tenure and the amount you need to invest. You should compare the interest rates on offer before investing your money. Here is a list of some of the popular banks and the rates they currently offer for deposits up to Rs1 crore over various tenures.